Posts tagged ‘oil drilling’

Despite devastating weather that sent energy market participants into a frenzy, the average of the 12-month forward curve for WTI remained flat month on month at $50.43/b. However, internal rates of return (IRR) increased across the board due in large part to higher natural gas liquids (NGLs) prices.

There are many contributing factors that are causing US oil prices to remain suppressed. Part of the reason is that petroleum inventories are not declining as quickly as some market participants had expected. Also, there are concerns that persistent production growth in the US will delay the market’s ability to balance. Additionally, production has rebounded in Libya and Nigeria, which has offset some of the efficacy of the OPEC-led production cut.

In the last year, commodity prices have improved considerably. While oil prices were sub-$40/b in early 2016, producers were cutting back on new drilling and focusing on efficiencies — by cutting costs and concentrating drilling in the highest initial production (IP) rate counties — to get the most bang for their buck.

Sometimes, it’s the little things. Sometimes, the little thing might be less than six inches long.

When the price of oil started falling, everybody wanted to know what the breakeven price was in US shale plays; there seemed to be a general consensus that if you said $70, you’d sound reasonably intelligent. More recently, my colleague Carin Dehne Kiley of S&P Ratings wrote a thorough analysis that said when you figure in natural gas value and average interest expense, the “required wellhead oil price” was $55.

An ambitious effort to collect “near miss” data from US offshore drillers has stalled, but regulators are working to get the program back in gear.

The program to identify leading indicators of loss of well control events was launched after the 2010 Deepwater Horizon accident. It is patterned after the similar, successful partnership between the Federal Aviation Administration and NASA to collect data on aviation mishaps.